Comcast-NBCU: Opposition Lines Up

Comcast outlines promises to make deal more palatable to regulators
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Comcast-NBC Universal: Complete Coverage

The response out of Washington Thursday was swift to the announcement of the Comcast/NBCU deal and the promises the company made to make it more palatable in Washington. Those include extending the FCC's program access rules to retransmission consent negotiations for NBC and Telemundo stations.

Since the deal did not include a spin-off of those broadcast properties, unbundling of content, or program access conditions on Internet content, it was already not enough for Free Press, which issued a set of proposed conditions with those prominently on the list.

"The Obama administration has made a commitment to reinvigorating the nation's antitrust laws," said Corie Wright, Free Press policy counsel in one of many statements flooding e-mail boxes. "They can't ignore the severe threat this merger poses and must take the necessary measures to prevent harm to competition and consumers. The correct response to this merger is to just say no."

The proposed merger will face plenty of criticism in Washington, including not only from Free Press, the Consumer Federation of America, and unions worried about job losses, but from potential competitors including smaller and midsized cable operators concerned about competing with a 1,600 pound gorilla.

It will be the first media merger to come under scrutiny by the new Democratic majority of the FCC, a Federal Trade Commission under Democratic management, and a Justice Department with a charter from the Obama administration for more muscular merger reviews.

Look for congressional hearings as well with the House and Senate Commerce committees headed by veteran media critics Rep. Henry Waxman (D-Calif.) and Senator Jay Rockefeller (D-W.Va.)

The FCC has a self-imposed 180-day shot clock on merger reviews, but that is only a target, not a deadline. It could stretch beyond that, particularly if the FCC is planning any media ownership rule modifications--as part of its quadrennial review--that could implicate the deal.

"While we believe that this transaction is, and will be determined to be, pro-competitive, proconsumer, and strongly in the public interest," said Comcast Executive VP David Cohen in a public memo Thursday, "we recognize that competitive concerns will be raised about the combination of such significant multiplatform assets in a single company," he said the conditions effectively address those concerns.

Those conditions include:

"The continuation of free over-the-air television through the broadcast networks of NBC and Telemundo.

"Continuing and extending NBCU's policy of ensuring that the content of NBC's news and public affairs programming would not be influenced by the non-media interests of the owners.

"Preservation and enrichment of the output of local news, local public affairs, and other public interest programming, including commitments with respect to PEG channels.

"An expanded commitment to children's programming, content ratings information for parents, and diverse programming.

"At least 75% of Comcast's On Demand programming will be available at no extra charge.

"Extension of the key components of the Commission's program access rules to retransmission consent and the high definition feeds of our cable networks.

"On the program carriage side, a commitment to add new independently owned and operated channels to Comcast's digital lineup after Comcast is all digital and on customary terms and conditions.

"Honoring all of NBCU's collective bargaining agreements."

"Comcast doesn't get it," said Jeff Chester, executive director of the Center For Digital Democracy Thursday. "It's a very weak document: nothing on the key issue of network neutrality and online programming access, safeguards for privacy and interactive ads, nor meaningful concrete funding commitments for local and national news and diverse (non- Comcast/NBCU owned) minority programming. Comcast continues to demonstrate a cable monopolist mentality that it doesn't really have to provide a serious array of public interest requirements to policymakers."

"The combination of the country's largest cable company, a TV network and a movie studio could present grave dangers to a free and open Internet," said Public Knowledge President GiGi Sohn in a statement. "The sheer size of the transaction makes a net neutrality rule that much more necessary, as more content comes under the control of another giant media company. Regulators will have to make certain that Comcast does not give advantage to NBC programs and films over others. The transaction also poses a threat to what is known as over-the-top video -the ability of other services to have access to programming," she said. "Just as the satellite industry needed access to cable programming 15 years ago, so now do Web-based distributors need access to programming."

But the Washington input was not confined to complaints from media concentration foes decrying the deal.

In an interview on the eve of the announcement, Matt Polka, President of the American Cable Association, which represents about 900 smaller and midsized cable operators signaled his group could have big problems with the merger.

"We have significant concerns about the ability of our members to access programming and the rates they would have to pay." He says sports is a significant concern about the consolidation of Comcast's regional sports networks and NBC sports programming as a new and powerful competitor for ESPN. That, he said, could create a feeding frenzy in the marketplace with skyrocketing sports rights, "ultimately ending up in the consumers' lap and on their bill."

"I am sure that we will be working with other industry and consumer groups suggesting quite aggressively the harms to consumers that will result from this," he says. Polka said ACA's view of this deal is similar to its reaction to the meld of News Corp. and DirecTV, which combined Fox TV stations with the satellite operator. "You have essentially what is the harmful consolidation of network programming, cable programming, owned and operated broadcast stations, affiliates, that can be combined in anticompetitive ways."

The FCC imposed conditions on DirecTV/News Corp. because of the "disproportionate leverage" that could be concerted by the combined companies, said Polka. "If that was the case in DirecTV News Corp., it's off the chart with Comcast/NBCU particularly because of size. The largest cable operator and a major top-three network."

He agrees that the Internet is a new factor since the DirecTV/News Corp. conditions that has to be taken into consideration. Free market fans said the criticisms were overblown.

Former FCC Media Bureau Chief Ken Ferree, now with the Progress & Freedom Foundation, said despite the "hoots and hollers" from advocacy groups, "the sky is not falling."

"Simply put," he said, "the deal raises no general antitrust or diversity issue."

"The Comcast-NBCU transaction, like all combinations of its size, should receive close scrutiny," said Randolph May of the Free State Foundation. "But one thing we know from history is that the protest cries of 'undue media concentration' not only will be exaggerated, but wrong. The so-called consumer groups willfully refuse to acknowledge how competitive the media landscape has become in the last decade or so. In such a competitive environment, it is simply too risky as a business proposition for Comcast, or any other media platform, to favor its own content over content supplied by unaffiliated providers. Consumers have too many alternatives to which they can turn."

The media activists have been weighing in loudly and often against the proposed deal, partly as a reaction to analyst's early handicapping that it would probably successfully run the regulatory gauntlet.

Analysts at investment firm Stifel Nicolaus early on said they expect a Comcast/General Electric jointly owned NBC Universal to pass government muster. They argue that while they expect Justice to be "more open" to concerns about vertical integration--owning both the content and the distribution--it would be tough to establish that the combo would be sufficiently anticompetitive" to warrant blocking the deal. They suggested baseball-style arbitration for disputes over regional sport nets, collective bargaining for small cable operators and program access guarantees as likely precedent for those conditions.

They also pointed to the rise of AT&T and Verizon as video competitors who would likely push hard for conditions, as well as online video interests like Hulu, in which NBCU has a stake, as factors that would complicate the analysis.

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